Have Gold and Silver topped out?

Gold retreats from $4,400

A few weeks ago, I highlighted gold’s immensely powerful upward momentum. Then, the precious metal was hurling itself rapidly towards the $4,000 mark for the first time. Whilst seemingly significant, $4k offered no technical resistance at all to gold’s extraordinary advance. Prices quickly jumped higher and peaked near $4,400 (see below).

The past few sessions, however, saw the metal suffer from a large sell-off. Prices even traded south of $4,000 again. Naturally, many investors are left wondering: What’s going on?  Is gold’s blistering rally over?

There is an old saying, if you can remember, that ‘trees don’t grow to the sky’. Certainly, this applies to many risky asset prices, such as stocks and commodities. More importantly, “no stock ever goes up in a straight line’. Counter-trend rallies, or consolidations, are part and parcel of any prolonged price trend. After all, randomness permeates financial markets.

In the case of gold, prices climbed to multiple record highs for the best part of August-October. That, historically speaking, was an especially long bull run. You may not realise this when looking at the daily price chart below, as there was a four-month sideways trend between $3.400-3,100.

But if I were to drag up gold’s weekly price chart below, you will immediately see how speculative its uptrend had become.

The initial gentle advance has given way to a parabolic uptrend. A near-vertical price rally, no matter how good its fundamentals are, was never sustainable long term. Sooner or later, a sharp correction will arrive and pop it. Gold is no exception.

Where will gold’s correction stop?

The question now becomes: How low will gold’s correction go?

Unfortunately, few can answer this question accurately. Technically, once prices dropped below $4,000, gold can trade anywhere from $3,300 to $4,000 – a wide $700 range.

Moreover, the presence of ‘stop losses’ along the way will exacerbate price volatility. Gold’s rally, by the start of October, was a crowded trade. This means that a lot of speculative funds were stacked on one side of the trade, namely, the buy side. As gold’s momentum reverses abruptly, it will trigger the automatic exit of these long positions. This creates more selling pressure which, in turn, will hit more stops; which will then create more selling, etc…..you get the point.

What is more, in that Macro Weekly, I highlighted that November is one of gold’s weakest seasonal points. This may create more uncertainties for gold bulls.

Therefore, it will be hard to pinpoint where gold’s corrective wave will bottom out, perhaps in the low three thousand or high two thousand. Or, the more optimistic investors may look to $4,000 as the key support.

Silver back in the forties

For silver, its price trend mirrors that of gold’s.

Prices surged nonstop from $40 in early September to above $50. But as soon as gold topped out, silver did so too. It peaked at $54. Prices then broke south of the psychological $50 level and skidded all the way to $46 (see below).

Like gold, predicting where silver will bottom out is hard. But technically $40 could offer some support to initiate a tentative rebound.

Of course, should gold pause its correction at $4,000, silver may immediately affirm $45 as support. But this is only a speculative conjecture.

Should we buy gold now?

The next big issue is whether gold’s cyclical rally is over – for good.

This is an important question. But the answer can only be found on a macro level.

The first point to note is that gold has been rallying alongside stock markets in the second half of 2025. Fear was notably absent in financial markets as equity indices notched one record high after another. S&P 500 and Nasdaq continue their remarkable ascent further this week! The last two sessions, in particular, saw two bullish upside gaps in both indices. These strong upside gaps remind us of gold in early October (see below).

In other words, in the absence of fear gold’s recent advance was driven mainly by greed and momentum capital. Its uptrend quickly overheated.

The second point to note is that gold’s fundamental case has not changed. A recent IMF Stability Report (October) has produced an interesting graph that charts various risks in markets, including stretched asset valuation, mounting fiscal strains and increasing contagion impact (see below). All these factors continue to benefit gold.

Ray Dalio, the esteemed fund manager, recently re-articulated his bullish view about gold (17 Oct 2025):

…to me gold is the most sound fundamental investment rather than a metal. Gold is money like cash and short-term credit, but unlike cash and short-term credit which creates debt, it settles transactions—i.e., it pays for things without creating debt and it pays off debt…..Gold occupies a unique place in the portfolios of investors and central bankers because it is the most universally-accepted non-fiat currency-based medium of exchange and store-hold of wealth, and it is a good diversifier to other assets and currencies in these portfolios.

More importantly, he reminded readers why gold is money:

History has also shown that gold is a money and store-hold of wealth that has intrinsic value, so it doesn’t depend on anyone giving the holder of it anything other than the gold itself. It has been a timeless and universal money. History has also shown that, since 1750, about 80pct of all currencies have disappeared and the other 20pct have all been severely devalued.

Source: IMF (October 2025)

But gold’s recent parabolic advance has more or less priced a substantial chunk of these macro risks.  The US dollar, for instance, hasn’t devalued much these days.

Of course, gold bugs will immediately retort that gold’s advance will resume once stock markets start to weaken. That could very well happen. Not to forget is that the FOMO effect in gold is just starting. Compared to AI, gold’s FOMO may well last in the next year. Lastly, gold hasn’t even reach $5,000 yet.

As for silver, $54 is nowhere near its real price peak.

Final Remarks

However bullish gold’s investment case is, gold price cannot continuously defy market gravity. Its latest correction is a healthy – and much-needed – pullback to erase the accumulated overbought froth.

But how should one approach gold now? The metal, as Dalio reminded us, remains a haven asset. As such, one ought to have some gold exposure (financial or physical) in an investment portfolio. Leverage trading of gold, however, is another matter altogether. This should be discouraged unless one is an experienced and well-capitalised operator.

For many, ‘stacking gold’ periodically could be a crude strategy worth looking at, since this reduces a) timing risk and b) price risk (as we average out over a long period). You can refine this method further by purchasing more gold after, say, a quarter of big decline, and less when prices appreciate.

Market fashion comes and goes. What was fashionable last month (eg buy gold!) may not work out this month. But we all know what the gold investment case is. As such, gold could sit tightly in a portfolio and should only be traded thinly at the margin.